The pound rose on 19 March 2018 after the UK and the EU reached a two-year transition deal.
Photograph: Justin Tallis/AFP/Getty Images

Sterling stages recovery after Brexit talks progress

The pound has strengthened over the course of the past month and is close to the highest levels seen since the EU referendum, after the government struck a provisional deal with Brussels over a transition period to smooth the Brexit process. Sterling had fallen against the dollar earlier in the month amid a recovery in the value of the US currency, but has since recovered thanks to the progress made in the EU talks, ending the month up about 1.6%. The pound is still worth about 5% less than it was immediately before the referendum.

FTSE 100 continues to slide

The financial markets have had a choppy start to the year amid fears the US Federal Reserve could raise interest rates faster than previously anticipated to counter rising inflation and the prospect of a global trade war triggered by Donald Trump. In the past month, the FTSE 100 continued its slide to the lowest level seen since late 2016, falling by about 2.5%, although the decline was not as steep as the drop in the previous month. Theresa May was, however, handed bad news when blue-chip consumer group Unilever chose the Netherlands for its headquarters over London – a move viewed as a blow for Brexit Britain despite denials from the company that it had little to do with its decision.

Better than forecast

Inflation drops as Brexit vote effects begin to fade

Inflation fell further than expected last month, as the effects of the Brexit vote on the price of petrol and food finally begin to fade, easing the pressure on squeezed British households. The consumer price index (CPI) fell to 2.7% last month from 3% in January, reaching its lowest level since July last year, according to the ONS. Economists’ had expected 2.8%.

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Worse than forecast

Trade deficit widens, while world reels from Trump steel tariffs

The prospect of Britain successfully forging new trading relationships outside the EU took a knock when Donald Trump raised the chances of a global trade war by announcing punitive steel import tariffs. The UK trade deficit – the difference between what Britain buys from abroad and sells overseas – was also worse than expected in January, according to the latest ONS data. The trade in goods deficit rose to £12.3bn, from a revised figure of £11.8bn in December, driven wider by an increase in imports such as aircraft and cars from non-EU countries, as well as fuel from EU nations.

Better than forecast

Key industries point to stronger economic growth

After a sluggish start to the year, there were signs of a fightback from key sectors of the British economy last month. Britain’s dominant services sector recorded the fastest rise in new work since May 2017. The Markit/CIPS UK Services PMI, a key gauge of business activity, reached 54.5 in February from 53 in January – on a scale where anything above the 50 mark indicates growth. Although there was a slight fall in the rate of activity seen in the manufacturing sector, the construction industry staged a recovery alongside the services sector to indicate a gradual return of momentum for the economy as a whole.

Worse than forecast

Public finances unexpectedly worsen, despite positive trend

An improving picture for the public finances was one of the only reasons for Philip Hammond to feel “Tiggerish” at the spring statement, amid rapid growth in the value of self-assessed tax returns this financial year. However, the latest figures for February show the government borrowed £1.3bn more than it received from taxes, which was worse than expected, for a deficit of about £1.1bn. Nevertheless, borrowing for the financial year so far is £2.5bn lower than at the same point in the previous period, at £41.4bn, which is the best year for the public finances since 2008.

Better than forecast

UK earnings grow at the fastest rate in more than two years

There were early signs that pay growth could finally begin to outstrip inflation last month, as the latest data from the ONS showed average weekly earnings rose at the fastest rate in more than two years in the three months ending in January. Total pay including bonuses rose by 2.8%, beating economists’ expectations. Excluding those one-off rewards, wages rose by 2.6%, up from 2.5%. The number of people in work also increased by 168,000 to 32.25 million, pushing up the employment rate to 75.3%,the joint highest level since comparable records began in 1971.

Better than forecast

Retail sales rise, easing pressure on the high street

After a torrid Christmas and a weak rebound in January, the British high street had a better February with the first increase in retail sales for three months. Growth was driven by sales of petrol, as well as online and in supermarkets. But there has been gloomy news for retailers in recent weeks, with the collapse of Maplin and Toys R Us, and Next reporting its most difficult year for a quarter of a century.

Worse than expected

House prices

The downturn in the housing market gathered pace last month, as new buyer inquiries fell for the 11th month in a row and the average number of properties on estate agents’ books dropped to a record low. The latest monthly snapshot from the Royal Institution of Chartered Surveyors (RICS) showed the balance of surveyors reporting an increase in house prices over the last three months fell to zero, worse than forecast, and down from +8 in January. Despite the worrying national picture, there are some pockets of strength; with data from estate agency group YourMove suggesting the north-west of England had seen the fastest growth in house prices in the UK. Meanwhile, in parts of London prices have fallen by almost 15%. Asking prices are down in more than half of London postcodes.

And another thing we’ve learned this month ... the UK won’t save any money from Brexit for the next five years

The bold claim that Britain sent £350m per week to the EU, which was painted on the side of the leave campaign’s red bus ahead of the referendum, suggested a Brexit vote would mean more money for the NHS. But the latest estimate from the Office for Budget Responsibility, suggests there will be no savings from Brexit for the next five years. Meanwhile, the OBR also said it reckoned the final cost of Britain’s Brexit “divorce bill” with Brussels would be about £37.1bn, and that it would be paid until at least 2064.